Magazine

Why China's CDC May Climb Higher

February 18, 2007

One top performer on the NASDAQ is CDC (CHINA) (ticker symbol china), whose stock rocketed from 3.95 in June, 2006, to 10.58 on Feb. 7. There are more gains ahead, says David Riedel of Riedel Research Group, who is betting on a restructuring, which he says could kick up the shares by a further 50%. China's CDC is a global provider of enterprise software systems, mobile phone services, and online gaming, its fastest-growing unit. Riedel reckons the gaming--with 15% of estimated 2007 revenues of $351 million and 18% of earnings of 39 cents a share--will be spun off to shareholders and taken public this year. No gambling is involved in CDC's online games, which allow players to compete free of charge. They pay, however, for virtual items such as costumes and weapons. CDC gaming has grown fast and now has 37 million players. Sasa Zorovic of Oppenheimer (OPY) also rates CDC a buy and expects both software and gaming to be spun off in 2007. He forecasts profits of 52 cents in 2007 and 61 cents in 2008 vs. an estimated 29 cents in 2006.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. By Gene G. Marcial